Duane D. & Ina R. Gay - Page 2




                                        - 2 -                                         
                                              Accuracy-Related Penalty                
                Year         Deficiency       Under Sec. 6662(a)                      
                2000           $8,223                $1,644.60                        
                2001           3,657                 731.40                           
               The issues remaining for decision are:                                 
               (1) Should we sustain respondent’s determination for each of           
          the years at issue that the expenditures that petitioners made              
          during each such year on certain properties must be capitalized             
          and amortized?  We hold that we should.                                     
               (2) Should we sustain respondent’s determination that                  
          petitioners are liable for each of the years at issue for the               
          accuracy-related penalty under section 6662(a)?  We hold that we            
          should.                                                                     
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
               At the time petitioners filed the petition in this case,               
          they resided in Columbus, Nebraska (Columbus).                              
               At times not disclosed by the record during 2000 and 2001,             
          petitioners made expenditures for certain work that they had done           
          on two rental properties that they owned on 40th Street and 8th             
          Street, respectively, in Columbus (40th Street property and 8th             
          Street property).                                                           
               Petitioners timely filed Form 1040, U.S. Individual Income             
          Tax Return, for each of their taxable years 2000 (2000 return)              
          and 2001 (2001 return).                                                     







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